Jimenez et al v. Allstate Texas Lloyd's et al
Filing
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MEMORANDUM AND ORDER GRANTING 45 MOTION to Dismiss for Partial Dismissal of Plaintiffs' Original Petition.(Signed by Judge Keith P Ellison) Parties notified.(sloewe)
UNITED STATES DISTRICT COURT
SOUTERN DISTIRCT OF TEXAS
HOUSTON DIVISION
JAIME JIMENEZ AND GREGORIA
JIMENEZ,
Plaintiffs,
V.
ALLSTATE TEXAS LLOYD’S,
PILOT CATASTOPHE SERVICES,
INC., and BRONWYN C. DODSON,
Defendants.
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§ CIVIL ACTION NO. 4:10-CV-4385
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MEMORANDUM AND ORDER
Before the Court is Defendants’ Motion for Partial Dismissal of Plaintiffs’
Original Petition (“Motion”). (Doc. No. 45.) After considering the Motion, all responses
and replies thereto, and the applicable law, the Court concludes that the Motion should be
GRANTED.
I.
BACKGROUND1
Jaime Jimenez and Gregoria Jimenez (“Plaintiffs”) are the owners of a Texas
Homeowner’s Insurance Policy (“the Policy”), which was issued by Allstate Texas
Lloyd’s (“Allstate”), insuring their property (“the Property”). In September 2008, the
Property was severely damaged by Hurricane Ike. Specifically, Plaintiffs’ roof sustained
extensive damage, and water leakage through the roof caused additional damage to their
home’s foundation, ceilings, walls, siding and sheetrock. After the storm, Plaintiffs filed
a claim with Allstate pursuant to the Policy to cover the damage. Allstate assigned Pilot
Catastrophe Services, Inc. (“Pilot”) to adjust the claim. In turn, Bronwyn C. Dodson
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All facts are taken from Plaintiffs’ Original Petition. (Doc. No. 45-2.)
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(“Dodson”) was assigned as the individual adjuster on Plaintiffs’ claim. Dodson
conducted a substandard inspection which failed to include all damages and which
severely undervalued the actual damage. As a result, Plaintiffs’ claim was underpaid, and
they have yet to be fully compensated for the damage to their home by Allstate. Plaintiffs
filed this lawsuit against Allstate, Pilot, and Dodson (collectively, “Defendants”) for
violations of the Texas Insurance Code, fraud, conspiracy to commit fraud, breach of
contract, and breach of the duty of good faith and fair dealing. Defendants then filed this
Motion, seeking dismissal of Plaintiffs’ non-contractual claims.
II.
LEGAL STANDARD
Federal Rule of Civil Procedure 8(a) requires that a plaintiff’s pleading include “a
short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a)(2). If a plaintiff fails to satisfy Rule 8(a), a defendant may file a motion to
dismiss the plaintiff’s claims under Federal Rule of Civil Procedure 12(b)(6) for “failure
to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6); see also Bank
of Abbeville & Trust Co. v. Commonwealth Land Title Ins. Co., No. 05-30976, 2006 WL
2870972, at *2 (5th Cir. Oct. 9, 2006) (citing 5 Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1203 (3d ed. 2004)). “To survive a Rule 12(b)(6)
motion to dismiss, a complaint ‘does not need detailed factual allegations,’ but must
provide the plaintiff’s grounds for entitlement to relief—including factual allegations that
when assumed to be true ‘raise a right to relief above the speculative level.’” Cuvillier v.
Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007)). That is, “a complaint must contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.
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Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570).
A claim has facial
plausibility “when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. at 556). The plausibility standard is not akin to a “probability
requirement,” but asks for more than a sheer possibility that a defendant has acted
unlawfully. Id. A pleading need not contain detailed factual allegations, but must set
forth more than “labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Twombly, 550 U.S. at 555 (citation omitted).
Ultimately, the question for the court to decide is whether the complaint states a
valid claim when viewed in the light most favorable to the plaintiff. Shandong Yinguang
Chem. Indus. Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029, 1032 (5th Cir. 2010) (citing
In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)). The court must
accept well-pleaded facts as true, but legal conclusions are not entitled to the same
assumption of truth. Iqbal, 129 S. Ct. at 1950. The court should not “‘strain to find
inferences favorable to the plaintiffs’” or “accept ‘conclusory allegations, unwarranted
deductions, or legal conclusions.’” R2 Investments LDC v. Phillips, 401 F.3d 638, 642
(5th Cir. 2005) (quoting Southland Sec. Corp. v. Inspire Ins. Solutions, Inc., 365 F.3d
353, 361 (5th Cir. 2004)).
Allegations of fraud, however, must meet the stricter standards of Federal Rule of
Civil Procedure 9(b). Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must
state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P.
9(b). “‘At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and
contents of the false representations, as well as the identity of the person making the
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misrepresentation and what he obtained thereby.’” Benchmark Elec., Inc. v. J.M. Huber
Corp., 343 F.3d 719, 724 (5th Cir. 2003) (quoting Tel-Phonic Servs., Inc. v. TBS Int’l,
Inc., 975 F.2d 1134, 1139 (5th Cir. 1992)). The Fifth Circuit has explained that “Rule
9(b) requires ‘the who, what, when, where, and how’ [of the alleged fraud] to be laid
out.” Id. (quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 179 (5th Cir. 1997)). “‘A
dismissal for failure to plead fraud with particularity under Rule 9(b) is treated as a
dismissal for failure to state a claim under Rule 12(b)(6).’” U.S. ex rel. Grubbs v.
Kanneganti, 565 F.3d 180, 185 n.8 (5th Cir. 2009) (quoting U.S. ex rel. Thompson v.
Columbia/HCA Healthcare Corp., 125 F.3d 899, 901 (5th Cir. 1997)).
Rule 9(b)’s particularity requirement is “supplemental to the Supreme Court’s
recent interpretation of Rule 8(a) requiring enough facts [taken as true] to state a claim to
relief that is plausible on its face.” Id. at 185 (quotations and footnote omitted). Thus
Rule 9(b) “requires only simple, concise, and direct allegations of the circumstances
constituting fraud, which after Twombly must make relief plausible, not merely
conceivable, when taken as true.” Id. at 186 (internal quotations omitted). The
requirements of Rule 9(b) also “apply to all cases where the gravamen of the claim is
fraud even though the theory supporting the claim is not technically termed fraud.” Frith
v. Guardian Life Ins. Co. of Am., 9 F.Supp.2d 734, 742 (S.D. Tex. 1998) (quotations
omitted).
III.
ANALYSIS
The Court concludes that none of Plaintiffs’ non-contractual claims survives the
Motion to Dismiss. However, the Court will grant Plaintiffs leave to amend their Original
Petition to cure the deficiencies described below.
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A. Fraud and Conspiracy to Commit Fraud
Plaintiffs do not meet the heightened pleading demands of Rule 9(b) for their
fraud and conspiracy to commit fraud claims. The elements of fraud are (1) the defendant
made a representation to the plaintiff; (2) the representation was material; (3) the
representation was false; (4) when the defendant made the representation the defendant
knew it was false or made the representation recklessly and without knowledge of its
truth; (5) the defendant made the representation with the intent that the plaintiff act on it;
(6) the plaintiff relied on the representation; and (7) the representation caused the plaintiff
injury. Potter, 607 F.3d at 1032. Plaintiffs do not provide information about what the
“representations” were, or as to the time, place, and contents of those representations.
Benchmark Elec., Inc., 343 F.3d at 724. As Plaintiffs do not meet the heightened pleading
requirements, their fraud claim must be dismissed. Similarly, for their conspiracy to
commit fraud claim to survive, Plaintiffs “must ‘plead with particularity the conspiracy as
well as the overt acts … taken in furtherance of the conspiracy.’” Kanneganti, 565 F.3d at
193 (quoting FC Inv. Group LC v. IFX Markets, Ltd., 529 F.3d 1087, 1097 (D.C. Cir.
2008)). Plaintiffs recite the elements of a conspiracy claim without providing particular
details. Therefore, Plaintiffs’ conspiracy to commit fraud claim does not survive the
Motion to Dismiss.
B. The Texas Insurance Code
Plaintiffs allege Defendants violated Texas Insurance Code §§ 541.060(a)(1),
541.060(a)(2)(A), 541.060(a)(3), 541.060(a)(7), 541.060(a)(4), 542.055, 542.056, and
542.058.
i.
Texas Insurance Code § 541.060
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Plaintiffs claim that Defendants violated multiple provisions of Texas Insurance
Code § 541.060. First, Plaintiffs claim that Defendants “misrepresented to Plaintiffs that
the damage to the Property was not covered under the Policy, even though the damage
was caused by a covered occurrence,” in violation of § 541.060(a)(1). (Pet. ¶ 21.) That
provision states that “[i]t is an unfair method of competition or an unfair or deceptive act
or practice in the business of insurance to … misrepresent[] to a claimant a material fact
or policy provision relating to coverage at issue.” Tex. Ins. Code § 541.060(a)(1). As this
provision concerns reliance on material misrepresentations, its gravamen is fraud. Potter,
607 F.3d at 1032. Therefore, Plaintiffs are required to meet the heightened pleading
requirements of Rule 9(b). Plaintiffs offer no information as to “‘the who, what, when,
where, and how’” of the misrepresentations. Benchmark Electronics, Inc., 343 F.3d at
724 (quoting Williams, 112 F.3d at 177). Therefore, Plaintiffs’ claims for violations of §
541.060(a)(1) fail.
In contrast, Plaintiffs’ other claims under § 541.060 do not need to meet the
requirements of Rule 9(b). Plaintiffs allege that Defendants violated § 541.060(a)(2)(A)
because they “failed to make an attempt to settle Plaintiffs’ claim in a fair manner,
although they were aware of their liability to Plaintiffs under the Policy.” (Pet. ¶ 22.) That
section prohibits “failing to attempt in good faith to effectuate a prompt, fair, and
equitable settlement of … a claim with respect to which the insurer’s liability has become
reasonably clear.” Plaintiffs’ claim under § 541(a)(2)(A) does not rest on allegations of
fraud; as such, Plaintiffs need only meet the pleading requirements of Rule 8(a). Plaintiffs
offer no facts supporting their allegations that Defendants failed to effectuate a settlement
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in good faith, however. Instead, Plaintiffs merely provide conclusory allegations.
Therefore, Plaintiffs do not state a plausible claim for relief under § 541(a)(2)(A).
Next, Plaintiffs argue that Defendants violated § 541.060(a)(3), which states that
“[i]t is an unfair method of competition or an unfair or deceptive act or practice in the
business of insurance to … fail[] to promptly provide to a policyholder a reasonable
explanation of the basis in the policy, in relation to the facts or applicable law, for the
insurer’s denial of a claim or offer of a compromise settlement of a claim.” Fraud is not
the gravamen of this claim. Thus Plaintiffs do not need to meet the heightened pleading
requirements of Rule 9(b). Plaintiffs state that Defendants “failed to offer Plaintiffs
adequate compensation, without any explanation why full payment was not being made”
and “did not communicate that any future settlements or payments would be forthcoming
to pay for the entire losses covered under the Policy, nor did they provide any explanation
for the failure to adequately settle Plaintiffs’ claim.” (Pet. ¶ 23.) Plaintiffs offer no facts
to support these conclusory allegations. Therefore, Plaintiffs’ claim under §
541.060(a)(3) should be dismissed.
Plaintiffs further allege that Defendants “refused to fully compensate Plaintiffs,
under the terms of the Policy, even though [Defendants] failed to conduct a reasonable
investigation.” (Pet. ¶ 25.) Specifically, Plaintiffs assert, Defendants “performed an
outcome-oriented investigation of Plaintiffs’ claim, which resulted in a biased, unfair, and
inequitable evaluation of Plaintiffs’ losses on the Property.” (Id.) As a consequence,
Plaintiffs aver, Defendants violated Texas Insurance Code § 541.060(a)(7). That section
prohibits refusal to pay a claim without conducting a reasonable investigation with
respect to that claim. Plaintiffs need not meet the requirements of Rule 9(b), as §
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541.060(a)(7) is not substantively based on fraud. Plaintiffs do not offer facts showing
that Defendants’ investigation was unreasonable, however. Their threadbare allegations
are insufficient to meet the requirements of Rule 8(a). Plaintiffs’ claim under §
541.060(a)(7) must be dismissed.
Plaintiffs’ remaining claim under § 541.060, although not subject to the
requirements of Rule 9(b), does not survive the Motion to Dismiss. Plaintiffs allege that
Defendants “failed to affirm or deny coverage of Plaintiffs’ claim within a reasonable
time,” in violation of § 541.060(a)(4). (Pet. ¶ 24.) This claim is not based on fraud, and
therefore must be held to only the standard of Rule 8(a). Plaintiffs assert that they “did
not receive timely indication of acceptance or rejection, regarding the full and entire
claim, in writing from Defendants.” (Id.) Yet Plaintiffs present no facts suggesting that
Defendants failed to affirm or deny coverage within a reasonable time. Therefore,
Plaintiffs’ claim under § 541.060(a)(4) does not survive the Motion to Dismiss.
ii.
Texas Insurance Code § 542.055
Plaintiffs further allege that Allstate violated § 542.055, which concerns receipt of
notice of a claim. Specifically, Plaintiffs state: “Allstate failed to meet its obligations
under the Texas Insurance Code regarding timely acknowledging Plaintiffs’ claim,
beginning an investigation of Plaintiffs’ claim, and requesting all information reasonably
necessary to investigate Plaintiffs’ claim, within the statutorily mandated time of
receiving notice of Plaintiffs’ claim.” (Pet. ¶ 26.) This provision does not rest on
substantive allegations of fraud, as it does not involve reliance on material
misrepresentations. Nonetheless, Plaintiffs fail to meet the lower pleading requirements
of Rule 8(a). Plaintiffs do not offer any facts supporting their conclusory assertions that
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Allstate did not timely acknowledge their claim or timely begin investigation of their
claim. Nor do Plaintiffs provide facts suggesting that Allstate failed to request all
information reasonably necessary to investigate Plaintiffs’ claim. Such threadbare
allegations cannot survive the Motion to Dismiss.
iii.
Texas Insurance Code § 542.056
Plaintiffs claim that Allstate violated Texas Insurance Code § 542.056 by failing
“to accept or deny Plaintiffs’ full and entire claim within the statutorily mandated time of
receiving all necessary information.” (Pet. ¶ 27.) As this provision does not require
fraudulent conduct, Plaintiffs need only meet the pleading requirements of Rule 8(a). Yet
Plaintiffs have not provided any facts to support their claim. In fact, there are no details
as to the length of time between their submissions and Defendants’ response. Therefore,
this claim must fail.
iv.
Texas Insurance Code § 542.058
Finally, Plaintiffs allege that Allstate violated Texas Insurance Code § 542.058,
which concerns delays in payments of claims. Specifically, that section states that “if an
insurer, after receiving all items, statements, and forms reasonably requested and required
under Section 542.055, delays payment of the claim for a period exceeding the period
specified by other applicable statutes or, if other statutes do not specify a period, for more
than 60 days, the insurer shall pay damages and other items as provided by Section
542.060.” Tex. Ins. Code § 542.058(a). The gravamen of this section is not fraud, as it
requires only that a defendant wrongfully reject a claim. See Encompass Office Solutions,
Inc. v. Ingenix, Inc., 775 F.Supp.2d 938, 964 (E.D. Tex. 2011). Therefore Plaintiffs need
only meet the requirements of Rule 8(a). Plaintiffs state that Allstate “has delayed full
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payment of Plaintiffs’ claim longer than allowed and, to date, Plaintiffs have not received
full payment for their claim.” (Pet. ¶ 28.) Yet again, Plaintiffs have not provided facts to
support their conclusory allegations. Considering these allegations in the light most
favorable to Plaintiffs, they do not satisfy Rule 8(a).
C. Duty of Good Faith and Fair Dealing
Plaintiffs allege that Allstate breached its common law duty of good faith and fair
dealing. Specifically, Plaintiffs aver, “Allstate has refused to pay Plaintiffs in full, despite
there being no basis whatsoever on which a reasonable insurance company would have
relied to deny the full payment.” (Pet. ¶ 29.) Furthermore, Plaintiffs contend, “the liability
of Allstate to pay the full claim in accordance with the terms of the Policy was reasonably
clear.” (Id.) “An insurer has a common law duty to deal fairly and in good faith with its
insured in the processing and payment of claims.” Aleman v. Zenith Ins. Co., 343 S.W.3d
817, 822 (Tex.App-El Paso 2011) (citing Republic Ins. Co. v. Stoker, 903 S.W.2d 338,
340 (Tex. 1995)). An insurer breaches this duty if it denies a claim when it knows or
should know that it is reasonably clear the claim is covered. Id. (citing Universe Life Ins.
Co. v. Giles, 950 S.W.2d 48, 56 (Tex. 1997)). The duty is also breached if an insurer fails
to reasonably investigate a claim. Id. (citing Giles, 950 S.W.2d at 56). Plaintiffs need
only meet the requirements of Rule 8(a), as the duty of good faith and fair dealing is not
substantively based on fraud. Yet Plaintiffs plead no facts to support their conclusory
allegations. Therefore, Plaintiffs’ claims for breach of the common law duty of good faith
and fair dealing must be dismissed.
IV.
CONCLUSION
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For the above stated reasons, Defendants’ Motion to Dismiss is GRANTED.
However, Plaintiffs are granted leave to amend their complaint, to address the
deficiencies explained above, by March 1, 2012.
IT IS SO ORDERED.
SIGNED on this the 1st day of February, 2012.
KEITH P. ELLISON
UNITED STATES DISTRICT COURT JUDGE
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